The crisis continues for the blockchain bridge Multichain.
Rumors have been swirling since yesterday morning that Chinese authorities have arrested members of the Multichain team and that law enforcement now has control of a wallet containing more than $1.6 billion, according to Several Twitter accounts.
Whether the arrest occurred or why remains unclear, though it has forced companies to act. Binance already entered to address the situation, withdrawals have been suspended for many bridge tokens. The world’s largest crypto exchange said it will “wait for clarification from the Multichain team.”
Multichain—known as Anyswap before its $8 million exploit in 2021—is one of the largest blockchain bridges in crypto, facilitating the exchange of tokens across multiple networks. It allows ecosystems like Binance Chain, Avalanche, Polygon, and Ethereum to interact with each other.
As of this writing it has $1.5 billion in total value locked up, according to DefiLlama.
For most of yesterday and today Multichain official social media account fell silent. The Chinese authorities have not provided any information on this matter, although it should be pointed out that the details are mostly shared on Chinese-language platforms and slowly reach English-language outlets.
Now Phantom, a smart contract-supporting the blockchain powered by its native FTM token, has become an area of concern. Thirty-five percent of its assets are issued by Multichain, including 80% of the total stablecoin market cap, according to research firm Thanefield Capital.
The Fantom team hasn’t said much about Multichain on social media except for a short tweet yesterday saying that the bridge “acting as normal.” The team did not immediately respond Decrypts request for comment.
Phantom Foundation Director Andre Cronje said The Block that the team withdrew $2.4 million worth of MULTI tokens from SushiSwap yesterday because “there is no point in LP in times of uncertainty.”
Blockchain analytics firm Arkham Intelligence noted on Twitter that wallets belonging to some of the largest MULTI token holders, including HashKey Group, have moved nearly $3 million in the past 24 hours.
As questions mount, Multichain feels the heavy pressure of record high daily volume as fears that the bridge may be closed. Although the platform still shows a high amount of total value locked (TVL), there seems to be little panic within the market, according to researcher Defi Ignas, who dug into on-chain data.
Rumors about possible arrests in Shanghai yesterday prompted a 520% spike in daily bridged volume, but deposits exceeded withdrawals by $18 million dollars, Ignas wrote , citing DeFi Llama data. Although some on-chain data does not show a large capital inflow, the Multichain crisis has alarmed investors.
“It is sad but true that in mainland China, there is ongoing action against ANY locally operated crypto projects including infra, [decentralized apps]DeFi beyond [centralized exchanges]wallet or mining” Dovey Wan, founder of crypto investment fund Primitive Ventures, wrote on Twitter. He added: “Any local government can go after any crypto project they consider ‘rich’ or have large funds in custody.”
Vitalik Buterin, co-founder of Ethereum, did not weigh in on the current Multichain crisis, but had words of caution before trusting cross-chain bridges. He wrote in a blog post over the weekend that users should “try to minimize how much you rely on bridges,” adding that users should try to “keep the properties of chain where they come from.”
This story is still ongoing.